India reports FY22 CAD of 1.2% as trade deficit widens

RBI: India recorded a current account deficit (CAD) of 1.2% of GDP in 2021-22 against a surplus of 0.9% in 2020-21 as the trade deficit widened to $189.5 billion from $102.2 billion a year earlier.

Net FDI inflows

• Net Foreign Direct Investment (FDI) inflows at $38.6 billion in 2021-22 were lower than $44 billion in 2020-21.
• Net Foreign Portfolio Investment (FPI) recorded an outflow of $16.8 billion in 2021-22 as against an inflow of $36.1 billion a year earlier.
• For the January-March 2022 quarter, the CAD narrowed on a sequential basis to $13.4 billion, or 1.5% of GDP, against $22.2 billion, or 2.6% of GDP, in the December 2021 quarter.
• The CAD printed well below our forecast of $16 billion in Q4 FY2022 benefiting from higher-than-expected secondary income.
• On a year-on-year basis, although gold imports halved, and the services trade surplus rose, this improvement was dwarfed by the widening of the merchandise trade deficit led by imports of commodity inputs such as crude oil, coal and fertilisers, as well as electronic goods.
• Merchandise trade deficit narrowed to $54.5 billion in the March quarter compared with a deficit of $60.4 billion in the previous quarter.
• The deficit in the year earlier period, however, had stood at $41.7 billion.

Prelims Takeaway

• CAD
• Trade metrics